China proposed a new national security law in Hong Kong and announced, in a break from long standing practice, that they would not set an annual growth target for 2020, due to such an uncertain economic outlook.

Chairman Powell reiterated his opposition to negative rates. The Fed is likely to provide further measures if needed and, as fiscal policy begins to take effect, rates’ markets have the potential to maintain too pessimistic a view about the longer term prospects for recovery.

Economic numbers have been as bad as anticipated but we knew this was going to be the case and markets have largely not overreacted. Terrible macro data is not driving central bankers at the moment, they are still focused on keeping the system running and current inflation numbers, for example, are irrelevant. That said, the fact that one in four American workers are unemployed, coupled with the fact that many of them are better off claiming benefits, makes the task of restarting the US economy even more daunting. In the UK, the ONS admitted that they had been unable to collect a significant amount of data needed to calculate CPI anyway.

In the EU, there was eventual agreement to the tune of €500 billion of a Franco-German recovery fund, which paves the way for joint issuance of debt to tackle the crisis. Liability sharing regarding debt obligations has always been a huge constitutional ‘no, no’ but we should not be surprised as the EU always makes its biggest changes in a crisis.

The UK saw the successful issuance of a syndicated Gilt for the first time; £12 billion 10yr issued at 0.35% with a book of £82 billion. As recently published monthly budget deficit numbers showed a bigger number than the entire annual (outdated) forecast made in March, this must be a good thing. We also saw the DMO issue 3yr Gilts on a negative yield for the first time. Some MPC members are reluctant to rule out the notion of negative rates due to wanting to maintain every ‘tool’ at their disposal but have hinted at more accommodative measures and potentially more QE. Hopefully, they are as capable of seeing the damage done to the Eurozone and Japan as anyone else and it is their inflexible approach to asset purchases, in contrast to the Feds, which has helped push the short end of the curve to where it is.

Primary market issuance volumes remain very elevated whilst credit spreads have recently traded in a relatively tight range, remaining well supported. The Bank now owns £13.8 billion of corporate bonds through the APF.